HEXPOL AB (publ)

Welcome to the HexBall Q2 presentation. During the questions and answers session, participants are able to ask questions by dialing pound key five on their telephone keypad. Now I will hand the conference over to the CEO Klaus Dahlberg and CFO Peter Rosen. Please go ahead.

Thank you, operator. Hello, everyone, and warm welcome to the HexBall Q2 presentation. And thank you for joining us today. We know a lot of companies are reporting today. So I will start with the business update and Peter will then take us through the financials. If you please turn to page four. Thank you. I will start by going through the Q2 performance. Despite the uncertainty in the world, our group has shown resilience. We are happy to report that Europe showed stable sales and that we had another quarter of growing sales within our second business era, engineered products. With that said, we saw a lower demand in the North American market affected by the high uncertainty related to the US trade policy. That is actually the main reason why we could not grow the overall sales and results compared to last year. In the quarter, we delivered sales of close to 5 billion SEK and an EBIT of 756 million SEK with a margin of 15.1%. The operating cash flow was on a good level, reaching 834 million. If we move on to demand and sales prices, Organic demand was down some versus Q2 last year in North America, and it was mainly affected by lower demand from automotive. But that was partly offset by growth in building and construction, the medical segment, and also within wiring cable. We saw a positive impact of Capcom contributing to the growth within the wiring cable segment. Capcom, as you know, that we acquired recently and was consolidated from the 1st of May. Sales prices were sequentially stable with no big variations in prices for major raw materials. There is continuously a high uncertainty and that is due to the US trade policy and the ever changing tariffs. If we please turn to page five, The total sales was lower than last year with a negative FX impact of 340 million SEK. Organic demand was slightly down versus Q2 last year, but as mentioned before, it was offset by growth in other product areas. We saw an increase in demand from building and construction, medical as well as wire and cable. The supply chain is sequentially stable and also stable versus last year. Lower operating margin was driven by the product mix and the OPEX in relation to lower sales. If we look at Hexpol engineered products, we are happy to report, as I said, a continued increase of sales compared to last year and a good development across all product areas, leading to an increase in EBIT. One driver is gaskets that has been growing in China, where, for instance, applications for IT cooling are driving demand for plate heat exchangers. And that's where these gaskets are being used for plate heat exchangers. We are firmly committed to sustainability and our focus continues both for our own operation, but also when it comes to our products. We still see a high interest in recycled products resulting in a high number of projects, not least from the automotive industry. And we feel we are quite well positioned there. M&A is an important focus area for our growth plans. We look positively at the M&A environment and we have the financial resources to make more acquisitions. Short term, however, there is a bit of a wait and see mentality among some of the companies we have on our hit list. The acquisition of Capcom is consolidated, as I mentioned, from the 1st of May, and we have already found areas for cooperation within the group. When it comes to the US trade policy, if you would please turn to page six, We followed the situation closely, but we didn't see any direct impact in the quarter. We saw an indirect impact in North America with lower demand, especially in the automotive segment. We expect to see minimal impact of the US tariffs in Europe. With that said, we expect to see some direct impact on HEXPOL in the US, primarily related to prices on raw materials. We expect the net effect to be minimal as we work to find alternative suppliers. Of course, we negotiate purchase prices and execute needed price increases in line with our business model. We also expect to see a negative indirect impact on demand in North America, but it's difficult to quantify that at this stage. If you please turn to page seven. I just wanted to mention that we are now shaping the organization to strengthen the product area, thermoplastic and TPE. And that we informed you about in the Q1 call. And there we want to capture the growth opportunities within this area. As you know, today, rubber compounding is by far the biggest segment. And we intend to grow TP and TP also. If you please turn to page eight. This picture you have seen many times, it's our business model and it's actually the backbone for our operations and it's an important foundation to remain resilient in an uncertain business environment that we see right now. If you please turn to page nine, it's time for the financial update and you Peter will start with the sales development for Q2.

Thank you, Klaus. If I can ask you to turn to page 10, we'll take a look at the sales development here in the second quarter. And as you know, we delivered sales of 5 billion SEK, which is down 8% compared to the same period last year. Organic sales are down 6% in the quarter, while the acquisitions of Piedmont and Capcom added about 4% in sales. Not surprisingly, there were large negative effects in the quarter related to the strong Swedish Corona, adding up to about 370 million SEC here in the quarter. If we take a look at the lower organic sales, they are mainly driven by lower sales in North America, while Europe and Asia showed stable sales in the quarter. And as Claus mentioned, from an end customer perspective, Automoto showed soft demand, which was partly offset by increased demand seen with building construction and wiring cable, where we saw higher sales. If I can ask you to turn to page 11, just looking at the financial overview for the quarter. EBIT of 756 million SEC with negative FX effects of about 50 million SEC included. The margin came in at 15.1%, which is below what we did same period last year. Main reason for this is somewhat less profitable mix and somewhat higher OPEX in relation to the lower sales. And we'll come back to this. Strong cash flow in the quarter, 834 million SEK, which is well above the EBIT for this quarter. So strong cash flow in the quarter. And if I can ask you to turn to page 12, taking a look at the numbers from a little bit different perspective. Sales at 5 billion SEK, operating profit at just below 760 million below last year. And at the same time, we saw an operating margin of 15.1%. And if we take a look at the drivers of this, I can ask you to turn to page 13. And looking at the drivers to see what impacts the lower EBIT, you will see that it's driven primarily by the lower sales. The gross margin is just below that of last year, and that's affected by the product mix. But at the same time, it's actually sequentially stronger compared to the first quarter this year. OPEX is about 30 million SEC above last year levels, and this is driven by the acquisitions of Piedmont and Capcom that have been added, but also that we have about 15 million SEC in one-time acquisition costs. And if we would exclude the one-time acquisition costs, EBIT in the period would have been about 770 million SEC. If I can ask you to turn to page 14, we'll take a look at the two business segments, starting with Compounding, where we saw sales of 4.6 billion SEC in the quarter, which is below the same period last year. Negative FX has a sizable negative impact of about 340 million SEC in the period. Recently acquired Capcom and Piedmont at just about 200 million second sales, while their organic sales are down. And as mentioned before, the lower organic sales are seen in North America, while Europe showed sales on the same level as last year. And as mentioned, from an end customer perspective, lower demand on sales is seen with automotive customers, power growth set by building and construction, wiring cable, but also some of the somewhat smaller segments such as medical. Operating profit at 681 million SEK with a margin of 14.8% here in the quarter. If I can ask you to turn to page 15, taking a look at engineer products. that despite negative effects of just below 30 million SEC, showed sales that were up 3% compared to last year, driven by strong performance of the gasket products. Operating profit also strong, came in at 75 million SEC, 12% above same period last year, with a very good EBIT margin of just below 19% for the quarter. And if we leave the profit and loss and take a look at the balance sheet and working capital on page 16, we continue to manage the working capital quite efficiently despite adding Piedmont and Capcom. Working capital is on the same level as last year, both in absolute terms and in relation to the sales. There's no change to the underlying payment terms when it comes to customers and suppliers. And if I can ask you to turn to page 17, taking a look at the cash flow. As mentioned before, we deliver a strong cash flow of 834 million SEK with smaller movements across the various items. And that translates into what we take a look at on page 18, looking at the net debt. This stands at 4.5 billion SEK. with a net debt-debit ratio of 1.27 at the end of Q2. This is higher than last year. And this is mainly driven by the acquisition of the minority share of ALMAC here in the second quarter, as well as the acquisition of Capcom also here in the second quarter. All in all, we continue to stand with a very strong financial position here at the end of second quarter. And with that, I hand over to Klaus to summarize the second quarter.